Don't Let 'Chameleon Truckers' Get a Free Ride
As a cash management solutions company that provides collection services to the transportation industry, Metro Group Maritime has a unique view into the marketplace. Businesses involved in all modes of transportation are encountering challenges posed by payment delinquencies and insolvencies. These types of problems can be even further exacerbated in times of financial hardship. Market players are continuously changing, yet in some segments of the transportation industry, companies sometimes morph to avoid making payments.
These are the chameleons – reincarnated motor carriers – to watch for.
In a recent round-table session with Alais Griffin, Esq., former Chief Counsel at the DOT’s Federal Motor Carrier Safety Administration (FMCSA) and currently the founding partner at Griffin Strategic Law Advisors, Metro Group Maritime heard from this preeminent transportation attorney on the role of reincarnated motor carriers. Also known as chameleon carriers, these truckers submit new applications for registration with the FMCSA/DOT to skirt safety violations, avoid paying civil penalties, circumvent civil penalties, avoid negative compliance history, or evade contractual debts.
These unscrupulous motor carriers shift operations to newly-created companies or to affiliated companies under common operational control. The FMCSA defines reincarnated motor carriers as those who use either evasive practice. The carriers submit new applications for registration with the FMCSA under a new name to:
Continue operating after having been placed out-of-service ("OOS") for safety related reasons,
Circumvent denial of applications for operating authority based on a determination that they were not "fit, willing, or able" to comply with regulations,
Evade paying civil penalties, or
Avoid negative compliance history.
Federal regulations offer mechanisms to deal with reincarnated truckers. A Final Rule published in April 2012 and effective in May 2012 allowed FMCSA to make new companies liable for the deeds of the old. The rule established procedures for issuing OOS orders to carriers, intermodal equipment providers (“IEPs”), brokers, and freight forwarders that are reincarnations of entities with history of noncompliance, and it allowed the federal agency to consolidate records of reincarnated carriers with predecessor entities.
“The rule we issued gave regulators authority to shut down a new company based on the noncompliant activities of its predecessor,” explained Griffin. “And, as importantly, it allowed the violations of the old company to transfer to the new company, which resulted in higher penalties for reincarnating carriers.”
Over a dozen factors may be evaluated to determine if a reincarnated entity was formed, including its safety performance history; commonality of ownership, management, drivers and other employees; facilities and physical assets; dates of company creation and cessation; and consideration exchanged for assets purchased or transferred. Investigation into company management structures, corporate filing records, and insurance records are some of the data to expose chameleons. To put power behind investigations, Moving Ahead for Progress in the 21st Century Act (MAP-21), which became law in October 2013, banned reincarnated motor carriers and gave USDOT authority to revoke registrations and levy fines. Recovering debts from reincarnated motor carriers is difficult, but not impossible. By understanding and keeping current with the latest developments, federal regulations, applicable laws, and tracking mechanisms, and continually learning from subject matter experts, Metro Group Maritime can help you stay ahead of the issue and drive better collection results.